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This isn't even an implicit thing going on within the buyer's head. Large companies do this explicitedly.

The company I am right has people who spend all day looking at "risk-reduction" in the engineering effort. They map the process and anywhere there is a question mark, they bundles of money to turn it into a check mark, especially if it is on the critical path. As an engineer you definitely don't introduce question marks for silly reasons like "lower billable hour rate", you would get chewed out for even thinking about that.

Raganwald,

When you pay $250 an hour for a major consulting firm, you get $50 worth of consultant, and $200 worth of "Nobody ever got fired for hiring IBM/Accenture/CGI/Thoughtworks."

The assumption above is somewhat flawed. Here is why.

Most large companies have department budgets, project budgets etc and are usually sensible enough not a pay $250 for a huge team of developers etc. Most of the time, they hire a couple of devs at that rate. And usually when they bring in contractors, these contractors work with an existing team of in-house developers, project leads, PM's. Very rarely, they bring in a whole team of consultants/developers to run the whole show within the company. If they do that, the company better fire the whole IT or software department.

So it is ludicrous to think that when a project fails, the blame should go to the consultant or to the choice of the consulting co. and that is why people choose to use 'the big 4" to be safe. That assumption is flawed. Like i said, consultants usually work with a team of in-house devs, leads, PM's etc. So it wrong to think that your head is on the chopping block because of a small number of consultants working on the project or the consulting company that you choose to bring in. If the project fails, it is mostly due to mismanagement of the project by whoever is responsible. Not the small number of consultants or consulting company you choose to bring in.

"Very rarely, they bring in a whole team of consultants/developers to run the whole show..."

I can vouch this is not rare at all, from my experience.

you can structure your agreement with IBM/Accenture/etc based on deliverables. If they don't hit the deliverables by a certain deadline, they take on the extra costs. That's why they charge a lot up front -- as an insurance policy to guard themselves. At least that's my experience with IBM.

Where are the boutique agile companies doing cut-price SAP implementations? They don't exist...

SAP isn't exactly implemented in the most agile language ever.

The reason they don't exist is that even if they worked for free, they can't offer any "Nobody ever got fired for hiring us" value, so nobody doing SAP implementation will hire them.

Anybody who can afford SAP can afford to pay the full freight, in which case they want the full package including insurance against being blamed for problems.

I was going to add that boutiques can charge the same rate as the big firms, but they do so in different markets. One example: Above I noted that the person buying the service has downside of being blamed but no upside for saving money.

That isn't always the case. When the person making the decision is also under a lot of budget pressure, boutiques can make the same hourly rate by being more productive. That productivity often comes at the expense of insurance against blame, for example you can't have as heavyweight a process.

But if you are working for someone who cares about the money, being more productive can get you the gig and the rate.

The few boutique SAP shops that exist generally charge twice what Accenture charges, since they are staffed by top people with a proven track record of getting the job done after Accenture have failed.

Yup, that's what my company does!

Shades of MicroStrategy.

They don't exist because a certain deadness of the soul is required to do SAP implementations. Anyone who has done it will understand what I mean.

Your information about what share of revenues individuals receive is wrong in my experience. They way this business works is that a project gets staffed with a few who know what they are doing (and are often not employees), who may get 100% or more of their nominally billed rate, filled with the 1/3 to 1/8 people you mentioned whose main task it is to look busy and not say too much.

In my experience the only people making >100% are the partners. So you are correct that they are not employees, but not necessarily that they know what they're doing...

I remember some wit on Slashdot commenting that "SAP is how Lucifer interacts with our world". Having had some experience with various Tier-1 ERP systems I suspect there may be some truth to this theory.

Is it your contention that there are qualified SAP consultants to be had at $50/hr?

My contention is that the value to be obtained from SAP consulting is $50 for the consulting and $200 for the indemnity against being fired.

I seriously don't know the SAP market at all. It may be the case that there are indie SAP implementors who charge $50/hr. But $50/hr is so low that I don't see how any consulting company could stay in business charging it.

Yes, some consulting firms do charge a premium for their brand†. But all consulting firms charge a premium for shouldering project, scheduling, and employee retention risk on behalf of their clients; those factors alone, before you even factor specialization into the picture, seem likely to be worth more than $50/hr.

I think you may be falling into the same trap Jason Cohen fell into (which would be weird, because, aren't you a consultant?).

† On the other hand, note that some big shops, particularly in the big 4, offer huge discounts on consulting rates that they make up on audit works.

I don't charge $50 an hour :-)

It may be the case that there are indie SAP implementors who charge $50/hr.

LOL.

_On the other hand, note that some big shops, particularly in the big 4, offer huge discounts on consulting rates that they make up on audit works._

I'd be very surprised to see this in 2011.

Giving discounts to ensure audit work was one of the evils at the core of the Enron collapse and led directly to the _Big 5_ becoming _Big 4_ [1].

Even before Enron, the writing was on the wall. The Big 4 were very cautious about the conflict between highly paid "consulting" and audit work. How can you audit the effectiveness of the financial controls built into someone's SAP deployment, if it was you who implemented them!? This was partially the reason some of the Big 5 spun off their consulting arms [2] [3].

Don't forget, a large chunk of the Big 4 brand is their "independence" and "impartiality". How can you win audit work without those? (OK, doesn't work _exactly_ like that).

[1] http://en.wikipedia.org/wiki/Arthur_Andersen [2] http://en.wikipedia.org/wiki/Capgemini [3] http://en.wikipedia.org/wiki/Accenture

If you say so. Enron was almost 10 years ago. Discounts were happening last year. The Big 4 make their money from audit and financial work, not IT consulting.